The country’s first competition study into personal banking services has revealed a two-tier sector with limited competition and no disruptive forces to drive change and deliver consumer benefits.
Commerce Commission Chair, John Small, says that the Draft Report from the Market Study released today reveals that an apparent focus by the four major banks on maintaining profit margins has resulted in ongoing underinvestment in their core technology platforms, low levels of innovation, stable market shares, and sustained high levels of profitability.
Dr Small says “ongoing disruption needs to be baked in” to address the lack of obvious and aggressive competition for the major banks that means Kiwi consumers are missing out.
Two-tier oligopoly
Dr Small says the Commerce Commission’s analysis shows the status quo is a “stable two-tier oligopoly” where the top tier – ANZ, ASB, BNZ and Westpac – enjoy sustained high levels of profitability compared with their global peers.
“In a well-functioning banking market, we’d expect to see strong competition driving innovation and choice for customers, rather than the price-matching strategies we see here in New Zealand, which result in very stable market shares.
“The lack of a disruptive force in our banking market means competition between the majors is sporadic and not sustained.”
Dr Small says that while there are periods of relatively intense competition between the major banks, this t
